Recently, there has been a growing chorus of companies from all sectors that are committing to decarbonization. Some companies have taken their commitments a step further and publicly announced targets to achieve “net-zero carbon emissions” by a specific date. According to the Science-based Targets initiative (SBTi), a net-zero target must include an interim emissions reduction target (reductions around 50% by 2030 are common), as well as a long-term target to reduce emissions by 90% or more by 2050 (or earlier).
While announcing these targets can be a great way to show stakeholders, including the public, employees, and investors, that a company is taking climate seriously, many questions remain about how or if the company will actually achieve the target. Although SBTi has seen a significant increase in companies formally committing to achieve net zero by 2050, SBTi’s guidance may not be suited for all business structures, and as such, some companies ultimately decide to remove their SBTi commitment. Clearly, there are still many questions surrounding the usefulness, relevance, and applicability of SBTi and its usefulness and effectiveness in achieving actual decarbonization.
Why commit to net-zero?
On the one hand, emission reduction targets help companies signal their climate commitments and goals to a broader audience, including clients/customers, suppliers, and competitors. As more companies set reduction targets, it will become essential for companies to have these targets in place to stand out against competitors and satisfy regulatory requirements, for example, Public Services and Procurement Canada’s (PSPC) Standard on the disclosure of Greenhouse Gas Emissions and the Setting of Reduction Targets. In addition, SBTi provides sector-specific guidance for each heavy-emitting sector, including the buildings sector. This target-setting framework enables companies to follow best practices for GHG accounting, reporting, and target-setting that are specific to their industry. This is because the process of setting net-zero targets also requires companies to conduct other forms of climate-related work, such as understanding their environmental impact by conducting annual GHG emissions inventories, and annually reporting on the progress of emissions reductions. By following the SBTi guidance, companies can be certain that they are reporting on GHG emissions in line with the most up-to-date standards.
The framework for setting SBTi-aligned targets is accessible for companies working across 17 of the highest-emitting business sectors, and SBTi provides free, public tools for companies to set their own net-zero targets. To have a net-zero target validated by SBTi, companies use the tools to generate company-specific targets, and submit them to SBTi with a verification fee of ~$14,000 USD. However, companies can use the free tools to develop SBTi-aligned targets without going through the validation process.
The missing pieces
On the other hand, the combination of the steep reduction targets and decades-long timelines can give the impression of greenwashing when not backed up by credible and detailed action plans, where companies attempt to mask their negative environmental impacts through excessive marketing, or make commitments without intending to actually achieve them. In addition, SBTi does not provide guidance on how to reduce emissions or achieve net-zero, and companies are tasked with developing a plan themselves to achieve their targets. Without any guidance on the increased time, costs, and efforts involved in reducing their emissions, companies can fall short of achieving their commitments if these factors are not properly accounted for.
Although a public commitment to net-zero places pressure on the company to follow through, SBTi does not prescribe any penalties on companies for failing to achieve a target, or for reneging on a target prior to the target year. As such, if a company is not on track to achieve their target, they may simply renege on their commitment in order to avoid greater scrutiny.
The way forward
Most climate-conscious people would agree that it is vitally important to reduce our GHG emissions in the coming years and decades, and ultimately, achieve net-zero emissions. However, for the reasons above, many people see net-zero commitments as a way to facilitate more greenwashing by delaying climate action and decarbonization efforts years into the future, instead of focusing on real decarbonization today.
There are reasons to be skeptical of net-zero targets or other climate commitments made by big companies, especially if there is little or no evidence of real decarbonization action or policies. Luckily, for companies who are serious about reducing their emissions, there are many ways to quell these concerns.
In parallel with announcing net-zero targets, companies can publish a transition plan that details the steps they will take in order to reduce their emissions, with estimated carbon reductions for each step, as well as the time, effort, and cost required. In addition, annual emission reductions and/or the achievement of emission targets can be tied to executive pay or staff bonuses, in order to align company and employee incentives. While taking these additional measures does not ensure that the emissions target will be achieved, they significantly reduce greenwashing concerns and signal to the public that the company is serious about achieving its net-zero target.
The team at Mantle Developments is experienced with the SBTi target-setting process, and has helped companies to understand their carbon impact through GHG accounting, set ambitious yet achievable emissions reduction targets, and develop cost-efficient transition roadmaps to guide their emissions reduction strategies.
If your company is interested in developing and/or committing to net-zero or emissions reduction targets, please contact us.